Internal control

09.03.2018

Internal control is an integral part of management and of ensuring the achievement of business objectives. Through efficient internal control, deviations from objectives can be prevented or detected as early as possible, so that corrective measures can be taken. The tools of internal control include policies and principles, work instructions, manual controls and automatic controls built into information systems, follow-up reports, inspections and audits, among other things.

The objective of internal control in Kesko Group is to ensure the profitability, efficiency, continuity and freedom from disruptions of operations, the reliability of financial and operational reporting both externally and internally, compliance with laws and agreements and Kesko's values and operating principles, as well as safeguarding assets, expertise and information.

The planning of control measures begins with defining the business objectives and identifying and assessing risks that threaten the objectives. The definition of objectives and the assessment of risks should take account of not only operational objectives, but also the requirements for compliance of operations with laws, and for the accuracy of the information used in decision making and reporting. Control measures are targeted based on risks, and control measures are selected as appropriate so as to keep the risks under control.

The Board of Directors and the President and CEO are responsible for organising internal control. The management of each division, company and unit is responsible for taking care that efficient and effective control procedures are in place. The next year's focus areas in risk management and control are discussed in annual risk management and control discussions conducted with the Group and division managements. Every Kesko employee is obliged to comply with the K Code of Conduct and to report on any grievances to their supervisors.

In 2016, Kesko introduced the Group-wide SpeakUp whistle blowing channel through which employees and also business partners can report any violations of the K Code of Conduct. The SpeakUp channel is available in all nine languages of Kesko's operating countries.

Kesko's common functions guide and support the divisions and subsidiaries with policies, principles and guidelines pertaining to their respective responsibility areas. Kesko Group's internal audit function assesses and verifies the effectiveness and efficiency of Kesko's internal control, reports on it to the President and CEO and the Audit Committee of Kesko Corporations' Board of Directors and assists management and the Kesko companies in the development of the internal control system.

The Audit Committee of Kesko's Board of Directors has confirmed the principles of Kesko's internal control, which are based on good control principles widely accepted internationally (COSO 2013).